To avoid information loss, the auditory system must adapt the broad dynamic range of natural sounds to the restricted dynamic range of auditory nerve fibers. How it solves this dynamic range problem is not fully understood. Recent electrophysiological studies showed that dynamic-range adaptation occurs at the auditory nerve level, but the amount of adaptation found was insufficient to prevent information loss. We used the physiological MATLAB Auditory Periphery model to study the contribution of efferent reflexes to dynamic range adaptation. Simulating the healthy human auditory periphery provided adaptation predictions that suggest that the acoustic reflex shifts rate-level functions toward a given context level and the medial olivocochlear reflex sharpens the response of nerve fibers around that context level. A simulator of hearing was created to decode model-predicted firing of the auditory nerve back into an acoustic signal, for use in psychophysical tasks. Speech reception thresholds in noise obtained with a normal-hearing implementation of the simulator were just 1 dB above those measured with unprocessed stimuli. This result validates the simulator for speech stimuli. Disabling efferent reflexes elevated thresholds by 4 dB, reaching thresholds found in mild-to-moderately hearing-impaired individuals. Overall, our studies suggest that efferent reflexes may contribute to overcoming the dynamic range problem. Because specific sensorineural pathologies can be inserted in the model, the simulator can be used to obtain the psychophysical signatures of each pathology, thereby laying a path to differential diagnosis.SIGNIFICANCE STATEMENT The saturation of auditory nerve fibers at moderate sound levels seen in rate-level functions challenges our understanding of how sounds of wide dynamic range are encoded. Our physiologically inspired simulations suggest that efferent reflexes may play a major role in dynamic range adaptation, with the acoustic reflex moving auditory nerve rate-level function toward a given context level and the medial olivocochlear reflex increasing fiber sensitivity around that context level. A psychophysical task using advanced simulations showed how the existence of the efferent system could prevent unrecoverable information loss and severe impairment of speech-in-noise intelligibility. These findings illustrate how important the precise modeling of peripheral compression is to both simulations and the understanding of normal and impaired hearing.